Occidental, Pertamina Mull Sonangol's Iraq Deals

Source: Reuters 7/18/2010, Location: Middle East

U.S. oil major Occidental Petroleum Corp and Indonesian state oil firm Pertamina have shown an interest in taking a stake in Sonangol's two Iraqi oilfield development projects, a company official said.

"Our proposal will be for Sonangol to have a percentage of 45 percent in Najmah and Qayara," Sonangol executive J. da Graca Luis told Reuters in Baghdad on the sidelines of a meeting between oil companies and the Oil Ministry.

"The rest will be for Occidental or Pertamina or whoever," said Luis, who is the Angolan state oil firm's asset manager for Najmah and Qayara.

Sonangol currently has a 75 percent stake in the oilfield projects, with the Iraqi state oil company holding 25 percent. The fields are among a series awarded to companies last year which could catapult Iraq into the top ranks of global oil powers, potentially rivalling Saudi Arabia with a production capacity of 12 million barrels per day within seven years.

The Qayara field, with an estimated 800 million barrels, and Najmah with 900 million are in Nineveh province in Iraq's north, where Sunni Islamist insurgents including al Qaeda remain active. It remains one of the most dangerous areas of the country despite a sharp fall in overall violence elsewhere.

Luis said the aim of enticing other international partners into the ventures was to spread the risk and investment costs.

The company clinched the deals with an offer of a $6 a barrel remuneration fee and a plateau production target of 110,000 bpd for Najmah, and a fee of $5 a barrel and output target of 120,000 bpd for Qayara.

The fees were among the highest paid to any of the oil firms that won 20-year oilfield service contracts tendered, reflecting the risks and relatively low quality of oil at the two sites.

Sonangol has said it will invest $2 billion in Qayara.

It has also said it would welcome the building of a small refinery nearby that would help it refine the heavy oil in the reservoirs that it is developing, but Luis said building the refinery was not a condition.

Luis said Sonangol would hold the first meetings next month with potential partners.

An initial development plan for the fields was likely to be ready next month, as well, he said.

Angola emerged from an almost three-decade long civil war in 2002 to rival Nigeria as Africa's top oil producer.


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